Business groups remain downbeat despite fall in unemployment

The latest jobs market figures from the Office of National Statistics, which show a fall in unemployment, have been given a tepid welcome from industry commentators, with many warning that public sector cuts have yet to make an impact.

Nigel Meager, director of the Institute for Employment Studies, said: “There are some encouraging signs of stronger labour market demand in this month’s figures, with unemployment down by 34,000, and employment growing by 160,000. Vacancies have also risen again, though they remain well below pre-recession levels.”

However, Meager said he was seriously concerned by the news that long-term unemployment had increased again to reach more than three-quarters of a million and said: “Urgent policy action is needed to support this group back into work to avoid the damaging long-term social impacts experienced in previous recessions.

“Official figures are yet to register a major downturn in public sector employment, but this will inevitably follow… it is unlikely that the real, but muted recovery in the private sector will be sufficient to offset significant public sector job loss.”

Meanwhile TUC general secretary Brendan Barber said: “These are flat, disappointing figures and you need a magnifying glass to see much sign of recovery here.”

“When the cuts start to bite not only will jobs be lost from the public sector but across the private sector too. Many firms will lose public orders, and there will be an inevitable knock-on effect across the wider economy. A double-dip is beginning to look more likely every day.”

John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD), said: “While the jobs market was clearly much perkier in the spring quarter, with close to 2.5 million people unemployed, it is still far from in the pink. And with a big public sector jobs squeeze already underway and the pace of economic recovery uncertain, things may look a lot less rosy by spring 2011 than they do at present. Today’s good news may simply be the calm before the storm.”

Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club, agreed: “There are still clear risks ahead as the public sector begins to shed jobs. It remains highly debatable whether the private sector is sufficiently strong to offset the drag from the public sector.” But he added: “For the first time in many months we have the two key unemployment indicators telling us the same thing: that the labour market is improving.”

Ian Brinkley, associate director of The Work Foundation, warned that: “Much will depend on whether the jobs recovery in knowledge intensive services can be sustained and accelerated before the impact of public spending cuts feeds through into reduced numbers directly employed by the public sector and by firms who depend on large orders from the public sector.”